Symantec Delays Annual Report Amid Audit Committee Investigation

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By Amanda Iacone

Symantec Corp.'s revenue—and how the company reported it—is expected to be at the center of an audit committee-led investigation into its financial reporting.

Symantec, the world’s largest security software maker, hasn’t disclosed the exact focus of its internal probe, but the inquiry is most likely targeting how the company recognizes multiyear orders for its enterprise products and how those orders flow through income statements, said Mandeep Singh, senior technology analyst for Bloomberg Intelligence in New York.

Deferred taxes or accounting related to mergers and acquisitions may also be part of the investigation, according to a Credit Suisse analyst report to investors.

Ex-Employee Raises Concerns

Symantec, which makes Norton antivirus software, reported May 31 that it wouldn’t file its annual report on time as the company continues to investigate what it has described as “concerns raised by a former employee.” The same day, Nasdaq notified Symantec that it was out of compliance with the exchange’s rules because the report hadn’t been filed.

The software maker’s products for business customers brings in the majority of its revenue. But the company hasn’t been hitting revenue targets largely because the business segment line has underperformed, Singh said.

The recent acquisitions of LifeLock Inc. and Blue Coat Inc. also have changed the composition of the company, he said.

Integration Tough

“Sometimes it’s tough to integrate different companies. That just makes it more complex, both in terms of accounting and product integration,” Singh said. “That could have played a part in why this transpired.”

The company’s stock has dropped about 30 percent since news of the internal investigation broke on May 10. And a class action was filed May 25 on behalf of investors harmed by the loss.

Symantec previously announced that its audit committee was looking into the company’s public disclosures of historical financial results and its use of performance measures that don’t rely on audited generally accepted accounting principles, known as non-GAAP disclosures.

Some of the non-GAAP disclosures being scrutinized could impact stock trading plans and even compensation for company executives, Symantec has said.

The company’s statements also suggest that the audit committee is investigating whether any non-GAAP reporting may have been “manipulated in order to trigger compensation awards tied to” those performances measures, the Credit Suisse analyst report said.

CEO Greg Clark has said that executives wouldn’t receive any performance-based compensation while the investigation was underway.

To contact the reporter on this story: Amanda Iacone in Washington at aiacone@bloombergtax.com

To contact the editor responsible for this story: S. Ali Sartipzadeh at asartipzadeh@bloombergtax.com

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